Margaret Wente has been cutting and pasting the thoughts of others, since long before this recent incident involving her
blatant plagiarism.
You might recall how Margaret Wente (the plagiarist, no less) presented the income trust tax as some kind of morality play, while totally co-opting (i.e. cutting and pasting) the nonsensical rantings of Diane Urquhart, without ever determining whether those claims had any vaildity or merit to them.
Had Margaret truly wanted to present the income trust matter as a morality play, she (and her readers) would have been better served by her mentioning that Stephen Harper was elected in 2006 on an explicit promise to NOT tax income trusts and broke that promise 9 months later (Harper Lie #1). Or that Stephen Harper's attempt to justify his policy betrayal by arguing that income trusts cause tax leakage was a patent falsehood (Harper Lie #2). Or that income trusts were bad for Canada's economy (Harper Lie #3), which was disproven by any number of credible studies. How's that for a morality play, Ms. Wente?
Margaret Wente had exposed herself as a journalistic shill/hack long before this recent incident, as evidenced by this piece of government propaganda:
The moral of the trusts fiasco
The Globe and Mail
November 10, 2006
Margaret Wente
My husband and I don't own income trusts. Our investment manager
wouldn't let us. "Too risky," she would say. We used to be unhappy about
this because it seemed like everyone but us was getting rich. Now we're
happy, because it turns out she was right.
The chickens have come home to roost for a lot of dumb clucks (a.k.a.
retail investors). They've been thoroughly plucked, and are they ever
mad. But who should they be mad at? Not the Harper government, which did
what any government would do. Instead, they should be mad at the
investment industry, for selling them a bill of goods. They should be
mad at the securities commissions for turning a blind eye. And they
should be mad at themselves, for forgetting the basic rule of Investing
101: Caveat emptor. If something looks too good to be true, then it
probably is.
Every few years, some new financial craze takes small investors for a
ride. Last time, it was tech stocks. They were wildly speculative, and
everybody knew it. But income trusts were different. They were marketed
as safe, conservative products, something akin to a GIC. And the biggest
target market was seniors — a group with little financial
sophistication and a very low capacity for risk. The pitch was that
income trusts paid out nearly twice as much as bonds, but were almost as
safe. For many seniors whose fixed incomes have been depressed by low
interest rates, the pitch was irresistible.
In fact, many income trusts are highly risky, which makes them
totally unsuitable for seniors. "Where was the investor protection?"
demands Diane Urquhart, a top financial analyst. She's been warning of
the perils of income trusts for quite some time. But nobody listened.
There was too much money to be made. As the income-trust craze
snowballed, investment bankers, financial advisers, and other middlemen
raked in hundreds of millions. Billions more flowed into the pockets of
company executives, who gorged on bonuses and stock options and windfall
profits as their companies miraculously soared in value after being
converted to income trusts.
Meantime, small investors got greedy. They figured that if a little
bit of income trusts was good, a lot was even better. They forgot the
other rule of Investing 101: Diversify. It's these people who are the
maddest, because they lost, proportionately, the most. But the parties
they should be maddest at are themselves.
The dirty secret of income trusts was that a lot of them paid out
more than they were earning. A common practice was to jack up the
initial distributions in order to entice investors. That, in turn, would
goose the value of the company far beyond its underlying worth. They
were houses built on sand. Last year, the Canadian Accounting Standards
Board reported that income trusts were overvalued by between 39 per cent
and 50 per cent, and that distributions averaged 60 per cent more than
earnings. In other words, investors were encouraged to buy ridiculously
overvalued companies — and pay steep commissions for the privilege.
"I don't expect seniors to do their own homework," says Ms. Urquhart.
"The financial industry has the duty of care to provide products that
are appropriately designed." And where were the securities commissions?
Good question. "All those authorities who should have ensured proper
specification of the yield turned a blind eye."
But oh! It was great while it lasted! The management of a company
called Teranet raked in $167-million when it went public as an income
trust. In another deal, a New York private equity firm bought a humble
yarn manufacturer called Spinrite for $81-million. For converting it to
an income trust, the equity firm made a quick profit of $87-million.
Shortly afterward, the amateur knitting craze abruptly ended. Spinrite's
value fell by half, and it cancelled all its juicy distributions.
The pain hasn't ended yet. Ms. Urquart says that income trusts (which
remain sheltered from tax for four more years) have farther to fall
before they reach reasonable valuations. If you can't afford to lose any
more of your capital, sell now. And start asking your financial adviser
some tough questions.
mwente@globeandmail.com
